Labor market is weaker than it looks

Commentary: Official statistics hide large number of jobless

PORT WASHINGTON, N.Y. (MarketWatch) — If you want to know just how bad the labor market really is, then you need to multiply September’s jobless rate by three.

For starters, let’s recall that last month’s reported rate of unemployment was 7.8%. This was 0.3 points lower than in August and the lowest since the beginning of 2009. However, it was still a whopping three percentage points higher than the average rate posted in 2007.

In other words, September’s unemployment rate may be better than a poke in the eye with a sharp stick, but it was not greeted with cheers by many households. This is because the reported jobless rate hides more than it reveals.

For one thing, the unemployment rate does not take into account discouraged workers. These are people who have stopped looking for work because they have been unemployed for so long, they’ve given up. However, they would gladly take a job if one were offered.

In addition, those who have remained on the jobless rolls for over six months, the long-term unemployed, now make up 40% of the jobless. This is the highest percentage in over 60 years.

Then there are those who are working part-time but would prefer full-time employment. Others are employed as temps (without such benefits as health insurance, sick days, and so on) although they would rather have a permanent position.

Finally, in today’s economy, it is necessary to take into account the fact that many folks are working beneath their education or skill levels — for example, the former manager who now works as a clerk.

Add up all these categories and the “true” jobless rate is close to 25%. And when you consider that people are losing their jobs every day, even as others find work, you will find that as many as half of all households are being affected by the weak labor market each year.

Consumers show little fear of 'fiscal cliff'

(4:04)

Consumers are hurtling toward the fiscal cliff, even if they don't realize it yet. Photo: AP.

As for jobs, less than half the nearly 9 million jobs lost in the last recession have been regained. By contrast, at this point in the three previous recoveries, all of the jobs lost during the prior recessions were recovered and then some.

Besides jobs, the middle class has suffered another serious blow during the past five years. The values of their two biggest holdings, homes and stocks, declined sharply and are today well below where they were at their peaks back in 2007.

To add insult to injury, the Federal Reserve, in the name of resuscitating the economy in order to drive down unemployment, has pushed interest rates down so low, they are for all intents and purposes zero. This is preventing seniors and others who have managed to build a nest egg from earning a safe return on their savings.

Hurting the middle class even more is the high cost of food, energy and health care in the face of buying power that has stagnated in recent years. The threat of the pols to let the economy go over the fiscal cliff at year-end is not helping households’ collective psyches, either.

Now you can understand why most people believe that the economy is going the wrong way — the decline in the jobless rate notwithstanding.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.